“Texas butter” is a butter substitute made of lard, flour, and water. In some slang dictionaries, “Texas butter” means “gravy.”
 
 
http://www.legendsofamerica.com/WE-Slang8.html
Texas Butter - Gravy made with flour, hot water, and fried steak grease.
 
 
http://www.aaa-recipes.com/glossary/glossaryT.html
Texas butter - A butter substitute of hot lard, flour and water.
   
 
http://www.foodreference.com/html/fcowboyslang.html
COWBOY SLANG
Gravy - Texas butter
 
 
Talk Like a Cowboy:
A Dictionary of Real Western Lingo for Young Cowboys and Cowgirls
by Elizabeth Feagles
San Antonio, Texas: The Naylor Company
1955
Pg. 40: 
TEXAS BUTTER:  Gravy. A cowboy can’t CHAMBER A MEAL (eat) without gravy to dip his biscuit or his chunk of bread into. Traditional cowboy gravy us made like this: the cook fries the dinner meat, takes it out of the skillet, then throws a handful of flour into the sizzling meat drippings. After the flour has browned and the meat particles have been scraped up from the sides, he adds water, stirs again—and there it is, Texas butter.
 
 
26 March 1909,  Athens (Ohio) Messenger, pg. 2:
Fred Buckler asked a waitress at the hotel why Texas butter was so white. “Made from white cows,” she replied.
 
     
2 July 1955, Ames (Iowa) Daily Tribune, pg. 7:
“Texas butter” or “immigrant butter” doesn’t consist of butter in the least. Instead it’s made from the hot lard in which steaks have been fried, by adding flour, letting it brown, then pouring on hot water. The whole thing is stirred till it’s thick.